Federal Reserve Chairman Jerome Powell told the House of Representatives today that stablecoins should face stricter supervision similar to money market funds or bank deposits.
Representative Anthony Gonzalez (R-OH) specifically asked Powell about the most valuable stable currency, Tether. Tether claim Each coin is backed by a dollar, but this has been proven wrong; instead, it is mainly backed by commercial paper or debt. Powell said that most of the time these assets are very liquid, but this was not the case during the recent financial crisis. He explained:
“The market has just disappeared. At that time people will want their money. It’s simple: these economic activities are very similar to bank deposits and money market funds and need to be regulated in a similar way,”
Powell went on to say that if stablecoins are to become part of the payment field, then regulations need to be formulated, because at present “there is no regulatory framework for stablecoins.”
He also added that he believes that volatile crypto assets will not become part of the payment field in the future.Encrypted assets are mentioned on page 75 Monetary Policy Report Released last Friday. What they shouted out was just one sentence, in the context of “risk assets”:
“The soaring prices of various crypto assets also partly reflect the increase in risk appetite.”
Representative Stephen Lynch (D-MA) stated that the central bank digital currency or CBDC will reduce the number of cryptocurrencies being launched:
“You don’t need stablecoins. If you have digital U.S. currency, you don’t need cryptocurrencies. I think this is one of the strong arguments in favor of it.”
Powell said that a paper focuses on Central Business District In the US it will be launched sometime in September.
He also answered questions about the record inflation rate that the U.S. is experiencing, saying that the inflation rate “has risen significantly and may remain high in the next few months before slowing down.”
Powell insisted on his previous statement that the increase is temporary, and once certain markets (such as used cars) return to their pre-pandemic state, it may return to normal.
Powell will speak at the Senate Banking, Housing and Urban Affairs Committee tomorrow.